Companies trading with Chinese partners can now open renminbi commercial current accounts in Hong Kong with HSBC, just the latest step in the Chinese currency's slow internationalisation.
"Opening a renminbi commercial current account provides corporates with more flexibility when doing trade settlement," said Albert Chan, head of commercial banking for Hong Kong at HSBC. He explained that traders can now use cheques, in addition to remittances, when settling trade in the Chinese currency locally.
Launched on March 23, renminbi accounts are available to any company in Hong Kong, except financial institutions and insurance companies, and can be opened at any local HSBC branch. The bank is the first foreign institution to provide accounts in the Chinese currency in Hong Kong, but not outside the city.
Standard Chartered Bank launched renminbi current accounts in five of the Asean countries last October following the inauguration of trade settlement in the region the month before. The bank intends to begin offering the accounts in Hong Kong during the second half of this year.
The Bank of China also offers renminbi-denominated accounts in the city, but they are limited to retail, catering, accommodation, transportation, communication, medical services and education companies.
HSBC's announcement came a week after it set the first standard lending rate in the currency outside China at 3.88%. Other banks said they lend at a fixed interest rate of Shibor (Shanghai Interbank Offered Rate) plus 0.5%. HSBC first launched renminbi trade settlement in Hong Kong last July and expanded the services to Asean and Macau last fall.
"Hong Kong is the best place to market this type of product because it is the pilot site for the renminbi trade settlement scheme and has recorded the largest amount of renminbi activities," said Chan on why the bank chose Hong Kong to launch the current accounts. In addition, he said the offering was in line with the bank's strategy of actively "encouraging" renminbi use among trade customers in the city.
Chan said commercial current accounts could become available in other renminbi trade settlement markets in the future, but he did not go into specifics.
Direct settlement is desirable to Hong Kong companies because of the Chinese currency's regular appreciation against the US dollar. The renminbi has appreciated approximately 21% against the US currency since its peg was abandoned in 2005. The Hong Kong dollar is currently pegged to the US dollar.
In terms of interest in and actual account openings, Chan said HSBC has received "a lot of inquiries" concerning the accounts, but customers need to fully realise what the benefits of having a renminbi account outside of China are before it expects many to be opened.
"The accounts help customers in trading and to manage their cash flow," he explained. As of last Friday, there were already applications being processed.
This latest step in the internationalisation of the renminbi comes as pressure to revaluate the currency increases. The US has renewed its push for revaluation to ease the perennial trade imbalance between the two countries and last week Societe Generale corporate and investment banking head of global economic research Michala Marcussen said such a move could also help with inflation pressures in the country. Chinese premier Wen Jiabao has thus far rejected any pressures to revaluate.
The People's Bank of China opened up cross-border trade settlement to select markets in July 2009, allowing buyers and sellers to transact in renminbi without the need to convert to another currency.